WTI corrects to near $72.50, upside seems favoured as US debt-ceiling raise looks likely

• The oil price has shown some correction after a surprise build-up of oil inventory data.
• WTI is expected to resume its upside journey amid optimism over the confirmation of the US debt-ceiling raise.
• Expectations of a rate-hike pause by the Fed have fuelled optimism in oil bulls.

West Texas Intermediate (WTI), futures on NYMEX, have shown a marginal correction to near $72.50 after a stellar recovery. The oil price is expected to resume its upside journey amid optimism over the confirmation of the US debt-ceiling raise.

US President Joe Biden has announced that the White House will have a news conference on Sunday. The White House has agreed not to approve the default in which Democrats wanted to raise US borrowing cap without compromising spending initiatives for the budget. Each member attending US debt-ceiling negotiations has admitted that the approval of default will be a disaster.

This has faded fears of a default by the US Treasury in addressing bills by early June, which would have a catastrophic effect on the leadership position and credibility of the American economy.

Apart from that, the catalyst which has fuelled optimism in oil bulls is the fact that the Federal Reserve (Fed) is expected to hold its interest rate policy in June. Fears of a recession are critically higher amid tight credit conditions by United States regional banks and labor market conditions have started easing due to the bleak economic outlook. Therefore, Fed chair Jerome Powell is required to pause the rate-hiking spell to avoid recession ahead.

Meanwhile, The International Energy Agency (IEA) revealed that demand would surpass supply by 2 million barrels per day (bpd) in the second half of the year, with China’s making up 60% of the oil demand increase in 2023, as reported by Reuters.

On Wednesday, the oil price witnessed some selling pressure after the release of a surprise build-up of oil inventories for the week ending May 12. The US Energy Information Administration (EIA) reported a build-up of 5.04 million barrels while the street was anticipating a drawdown of 0.92 million barrels.